Activist Investing in Japan and South Korea (with Haidi Lun, Shery Ahn)

How is the broader macro environment, with rising yields and the Middle East conflict, informing your strategic decisions?

Haidi Lun

Seth Fischer

It makes for a more complicated world. The constant competition for capital means companies have to perform a lot better. As the cost of capital goes up, management needs to up their game. The most important thing is whether the board holds management accountable if they are not achieving higher than the cost of capital.

When do you start seeing the impact of higher yields feeding through to companies' vulnerabilities?

Haidi Lun

Seth Fischer

It becomes less of a theme for borrowing costs, as many companies have net cash and limited leverage. The issue is the discount on future cash flows for businesses with low ROICs and low ROEs. Management needs to be well ahead of that cost of capital.

Are you satisfied with the changes at Nidec?

Shery Ahn

Seth Fischer

I'm very satisfied with their new plan. The next challenge is to see them execute on it. They will revisit 40% of their businesses and get out of the E-Axle business in China. Importantly, we need to see them resolve the most recent investigation and get a clean audit.

The underlying business is very strong. They make incredibly important products. The culture under Nagamori-san clearly has to change. This was a systematic financial fraud, not typical in Japan.

Does the government stopping MBK from purchasing a Japanese company give you pause on the progress of foreign investment?

Shery Ahn

Seth Fischer

No. Investors are looking for strong Japanese companies to remain Japanese and produce higher returns. We are talking about fixing culture, reporting accurate numbers, and focusing on core businesses to produce more profits. These cases are consistent with the prime minister's goal of a stronger Japanese economy.

Where else are you turning your attention besides Japan?

Haidi Lun

Seth Fischer

We are spending a lot of time in South Korea. We are extraordinarily happy with the changes there. There has been an extraordinary run on the back of memory and the knock-on effect from global AI investments. We are also spending time in Hong Kong and continuing to invest in China.

SignalTube